TAX NEWS - 2010

Canada HST: HST is probably here to stay

As I watched our MLAs finally give passage to the legislation that paves the way for the introduction of the harmonized sales tax, I couldn't help but think that the tax is here to stay. No matter how loud the cries of "shame, shame!" were from the NDP side of the chamber, and no matter how many signatures the anti-HST petition eventually garners, the prospects of actually getting rid of the tax appear dim.

There are a number of obstacles here. First, the province is locked into a contractual agreement with the federal government to collect the HST for five years. Any attempt to undo that agreement earlier than 2015 would result in a hefty financial penalty for the B.C. government, likely in the neighbourhood of at least $1.6 billion.

Even NDP leader Carole James acknowledges this fact. If her party wins the 2013 election, it will preside over the HST system for two years before making any attempt to get rid of it. Frankly, I can't imagine public anger over the HST lasting at the current level for another five years. Therefore, it's unlikely there will be much political pressure on an NDP government to repeal the tax.

As well, if the economy is chugging along by that time, I'd bet a lot of economists will point to the HST as being a contributing factor to that economic growth (something they're already predicting, but their voices have been shouted down by the outcry over the HST)

Those who think a successful petition drive against the new tax will automatically get rid of it should go back and read the actual legislation governing such initiatives. If enough valid signatures are indeed collected (something we won't know until August), the petition is certified as successful and is sent to an obscure standing committee of the legislature.The select standing committee on legislative initiatives must meet within 30 days of receiving the petition (which would be a rare occurrence in itself, given that this committee hasn't met for 20 years or so) and decide one of two things. It must either recommend a legislative bill based on the language of the petition itself, or refer the bill and the petition to the chief electoral officer for a provincewide referendum.

Let's look at the first option. There's no guarantee the legislature will sit this fall, so it is conceivable that the anti-HST bill would not be introduced in the house until the spring of 2011.

But introducing a bill is not the same thing as calling a bill for debate and then passing it. Only the government - not the Opposition - can call a bill for debate, and given that passing such legislation would result in that huge financial penalty to the provincial government's already depleted financial coffers, does anyone seriously believe the B.C. Liberals would pass such legislation?

Finance Minister Colin Hansen desperately needs to balance his budget before the next election, so I don't see him blowing a $1.6-billion (and counting) hole in his fiscal plan. As for a provincewide referendum, you can pretty well forget about that option going forward. There's no way a government will set in motion a vote that will be seen as an anti-government vote - and one that would surely pass.

Bill Vander Zalm, the proponent of the anti-HST petition, says he will organize a recall movement against Premier Gordon Campbell if the government essentially ignores a successful outcome of his petition drive. But the earliest he can begin a recall campaign is mid-November, and he would need 40 per cent of the voters (not 10 per cent as with the petition) to sign a recall petition to be successful. That works out to more than 16,000 people.

Will the public anger still be there by that time? Perhaps, but the rules are stacked against a successful recall (just as they are stacked against a successful petition). The B.C. Liberals may yet pay a hefty political price for ignoring the public when it comes to the HST. But they appear willing to take that hit instead of scrapping the tax.